Bogue v. Ampex Corp.
| Decision Date | 02 December 1992 |
| Docket Number | No. 91-15038,91-15038 |
| Citation | 976 F.2d 1319 |
| Parties | Donald F. BOGUE, Plaintiff/Appellant, v. AMPEX CORPORATION and Allied-Signal, Inc.; Does 1-10, Inclusive, Defendants/Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Bruce H. Munro, Stephen A. Dennis, Thoits, Love, Hershberger & McLean, Palo Alto, Cal., for plaintiff/appellant Donald F. Bogue.
Robert M. Westberg, James J. Walsh, John R. Leflar, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendants/appellees Ampex Corp. and Allied-Signal, Inc.
Appeal from the United States District Court for the Northern District of California.
Before: WISDOM, * BEEZER, and TROTT, Circuit Judges.
The plaintiff/appellant, Donald Bogue, seeks severance payments denied him by his former employer. The district court upheld that denial under the Employee Retirement Income Security Act ("ERISA"). 1 We find that ERISA controls this case, supports the denial of benefits, and offers Bogue no other opportunity to challenge the decisions below. We AFFIRM, but decline to award attorney fees to the appellees.
Donald Bogue was a Vice President of the Audio-Video Systems Division of Ampex Corporation, a Redwood City manufacturer of sound equipment. Allied-Signal owned Ampex between September 1976 and May 1987. During November 1986 Allied-Signal informed ten executives of Ampex (including Bogue) that it intended to sell Ampex. To retain those executives, at least temporarily, Allied-Signal established the "Allied-Signal/E & I Sector Special Compensation Program for Designated Key Executives". 2 The program provided for severance benefits if
neither Allied-Signal nor the Buyer [of Ampex] offers you "substantially equivalent" employment and your employment is terminated.
"[S]ubstantially equivalent employment" was defined as a job that included "responsibilities similar" to those while Allied-Signal still owned Ampex. Allied-Signal would determine whether the benefits were appropriate in each case. The program would end on March 31, 1988. 3
Allied-Signal sold Ampex in May 1987. Ampex (through its new owner) assumed liability for paying severance benefits under the program. The new president of Ampex reorganized the business and offered Bogue a position as Vice President of Marketing, Sales & Service. He accepted the offer in the hope that it would help his career; he told Ampex, however, that he considered the position one that was not "substantially equivalent" to his old job. Citing the same complaint and seeking severance pay under the program, he resigned from Ampex in January 1988. Allied-Signal, which had obligated itself to administer the program after the sale of Ampex, denied Bogue's request for severance pay. It based that decision on Ampex's argument that Bogue's new position was substantially equivalent to his previous job.
Bogue later filed a lawsuit against Ampex and Allied-Signal in state court. The defendants successfully removed the case to federal court based on ERISA preemption; the district court denied Bogue's request for remand to state court, and later granted summary judgment in favor of Allied-Signal and Ampex. The district court concluded that Allied-Signal's denial did not abuse its fiduciary discretion, that no conflict of interest existed between Allied-Signal and Ampex that would require the court to apply a more stringent standard of review, and that Bogue had not made out a violation of 29 U.S.C. § 1140, which prevents an employer from intentional discrimination in depriving its employees of plan benefits. 4 Bogue appeals these decisions. The defendants "intend to seek attorney fees for the appeal"; we read that intent as a request for those fees.
ERISA preemption 5 provides for the removal to federal court of lawsuits involving employee benefit plans. Because ERISA preemption is the sole basis of federal jurisdiction in this case we must decide whether the "Special Compensation Program for Designated Key Executives" is an "employee benefit plan" under ERISA.
ERISA preemption is notoriously broad, but several recent cases have held that it has reasonable limits. In the leading case on this question the Supreme Court held that ERISA did not preempt a state plant-closure law that provided for a lump sum severance payment, triggered by a single event that may never occur. 6 In Fort Halifax the Court found that such a law "simply creates no need for an ongoing administrative program for processing claims and paying benefits". 7 Bogue contends that the Allied-Signal severance payment program should be similarly exempt from ERISA preemption. It had a very short term (17 months); it applied only contingently, if Ampex were sold, and if the employee were denied substantially equivalent work by the buyer; and it would apply only once to any individual employee. Allied-Signal contends that the program, by its own terms, required the sort of discretionary decision-making by the plan's administrator that is the hallmark of an ERISA plan. We agree with Allied-Signal. The program before us involved more than what Fort Halifax describes as "[t]he theoretical possibility of a one-time obligation in the future". 8
Bogue finds support in the Fifth Circuit's post-Fort Halifax opinion in Wells v. General Motors Corp. 9 Wells held that the General Motors "procedure by which employees could elect to receive a one-time lump payment if they ceased working at the plant" 10 was not an ERISA plan. The Court found that
[t]he plan was not ongoing, nor was there any need for continuing administration of the payment program.... The facts that GM made the payments pursuant to a Voluntary Termination of Employment "Plan" and that the employees received a benefit do not convert the plan into an "employee benefit plan" for purposes of ERISA. 11
This language might suggest that the Allied-Signal program, because of its limited time frame, its contingency, and its one-time application to any affected employee, was not an ERISA plan. Considering Allied-Signal's concession that even it was unaware that the program might be subject to ERISA, Bogue's argument is not without merit. In finding that the program is susceptible to ERISA preemption, however, we choose to follow the approach of the Third Circuit in considering a severance plan similar to the program in this case and a more recent Fifth Circuit case that narrows the broader implications of Wells.
In Pane v. RCA Corp., 12 the Third Circuit held that a corporate severance agreement, instituted to keep key employees at work during the possibly lengthy consummation of a corporate merger, was an ERISA plan. The court stated simply, without further elaboration, that the severance agreement "required an administrative scheme". 13
The reasoning of a recent Fifth Circuit case, Fontenot v. NL Indus., Inc., 14 fleshes out the logic behind Pane by accurately describing the fence between cases involving real ERISA plans and cases such as Fort Halifax. Fontenot looks to whether the plan in question " 'require[s] an administrative scheme' because 'the circumstances of each employee's termination [have to be] analyzed in light of [certain] criteria' ". 15 We adopt this approach, which places the Allied-Signal program on the ERISA side of that fence.
In this case, Allied-Signal, the program's administrator, remained obligated to decide whether a complaining employee's job was "substantially equivalent" to his pre-acquisition job. Although the program, like the plans in Fort Halifax and Wells, was triggered by a single event, that event would occur more than once, at a different time for each employee. There was no way to carry out that obligation with the unthinking, one-time, nondiscretionary application of the plan administrators in Fort Halifax and Wells. Although its application was uncertain, its term was short, and the number of its participants was small, the program's administration required a case-by-case, discretionary application of its terms. Whether or not Allied-Signal ever thought it would have to administer an ERISA plan does not matter; there was no way to administer the program without an administrative scheme. We hold that Allied-Signal was obligated to apply enough ongoing, particularized, administrative, discretionary analysis to make the program in this case a "plan".
Bogue contends that, even if the program is a "plan", it should not apply to him because he is not an employee of the plan's administrator, Allied-Signal. 16 The appellees contend that, because Ampex assumed liability for a program established and administered by Ampex, the program is maintained by Bogue's employer.
Bogue cites cases holding that controlling shareholders cannot be personally liable for damages under a plan maintained by the corporation they control; he contends that a shareholder, like Allied-Signal, can never be an "employer" under ERISA. 17 The appellees note that ERISA defines the term "employer" broadly. 18 They argue that a benefit program established by a parent corporation for the employees of its wholly owned subsidiary should not be removed from ERISA's coverage simply because their corporate structure might seem to divide the two companies. We agree. When a corporation establishes an employee benefit plan for the employees of its wholly owned subsidiary and retains the duty to administer that plan, and when the subsidiary bears the financial burden of funding it, the plan is "established or maintained by an employer" and is accordingly controlled by ERISA.
After deciding that the program's administrative discretion entails ERISA preemption, a related question follows: Does a federal court review Allied-Signal's decision that Bogue was not entitled to severance pay de novo or only for an abuse of discretion? 19
Bogue argues...
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